TOKYO, Nov 26 (Reuters)
Japanese game software makers Square Co Ltd and Enix Corp (JP:9684) said on Tuesday they planned to merge in April to pool resources and technology to allow them to better compete in the rapidly changing video game industry.

The deal would be worth about 88.79 billion yen ($727 million) at current share prices.

Under the deal, one Square share will be exchanged for 0.81 share in Enix. Enix will issue 48.76 million new shares to swap existing outstanding shares in Square.

Square shares were up 8.28 percent at 2,040 at 0434 GMT. Enix shares were untraded at 1,821 yen with bids at 2,045.

Japanese video game software makers are facing rising development costs to create new games for advanced gaming systems in a heavily saturated domestic market.

Enix, known for its blockbuster Dragon Quest" games, and Square, creator of hit "Final Fantasy" role-playing games, enjoy solid sales from these million-seller titles but they also make profits vulnerable to sudden shifts in demand.

"In order to defy stiff competition in the game market and to survive for a long term, we thought it would be the best to join our forces," Enix director Tatsuo Tomiyama told Reuters.

Square, which lost 16.6 billion yen after an unsuccessful foray into movie-making last year, is now owned 18.6 percent by Sony Corp (JP:6758) , which makes the powerful PlayStation 2 game system.

Square spokesman Hideki Tsuchiya said the game creator expected to win approval for the merger from shareholders including Sony as the two companies have little duplication in their operations and the merger was expected to create synergy.

Enix and Square, along with another gamemaker, Namco (JP:9752) , agreed last year to collaborate on operations.

The company officials said the latest deal would not include Namco. ($1=122.06 yen)

There you have it folks. The bomshell of the year. Discuss

nails

11-26-2002, 01:36 PM

Thats pretty sweet, I mean.. they are going to rule the RPG market with an iron fist.. Lets just hope they meet the expectations of a company that large.

Square has sold more than 42 million copies of the ``Final Fantasy'' games worldwide, while Enix has sold 30 million copies of ``Dragon Quest.'' Both are played on Sony Corp.'s PlayStation 2 video-game consoles.

Video game developers need to share costs to maintain their share of a $20 billion industry, where the combination of faster computer chips and jaded game fanatics demand Hollywood-style production techniques. Analysts say the typical budget for a hit game is 1 billion yen ($8 million).

``Game making is a hit-or-miss business, and they want to spend more money to produce attractive games that can become hits,'' said Jun Terasaka, who helps manage $163 million at Toyota Asset Management Co. and declined to say if he holds shares of Square or Enix.

Square President Yoichi Wada will head the new company, Square Enix, in which Enix shareholders will own a 55 percent stake.

Sony

Sony, the biggest maker of video-game consoles, holds 18.6 percent stake in Square through a game unit, Sony Computer Entertainment Inc., making it the second-largest shareholder. Sony Computer Entertainment will hold 8.4 percent stake in the new entity.

``The merged company will make better games for us and for the industry,'' said Kenichi Fukunaga, a spokesman at Sony Computer.

Square shareholders will get 0.81 of an Enix share and 30 yen in cash for each of their 60.2 million shares. That values Square at 1,548 yen a share based on yesterday's closing Enix share price. Nomura Holdings Inc. acted as a financial adviser on the transaction.

Enix shares rose 300 yen, or 16 percent, to 2,175 yen at the close of trading on the Tokyo Exchange. The shares were untraded in the afternoon as the number of investors wanting to buy them outnumbered those seeking to sell. They were allocated among investors by the exchange at the end of trading at 3 p.m. Square shares rose 6.4 percent, or 121 yen, to 2,005 yen.

Square Enix expects net income of 12 billion yen on sales of 61 billion yen in the year ending March 31, 2004, Square and Enix said in a press release.

``They are best-of-breed players in the role-playing game genre,'' said Zachary Liggett, an analyst at West LB Securities Pacific Ltd.

Square returned to profit in its fiscal first-half from a net loss a year ago as sales in the U.S. and Europe beat its expectations. Still, overall sales fell to 12 billion yen from 19.6 billion yen a year ago.

Square exited the movie business last year after its first feature-length film flopped. Square's ``Final Fantasy: The Spirits Within'' was a computer animated movie based on the ``Final Fantasy'' game series. The film failed to recoup its $135 million in development costs.

Celine

11-26-2002, 01:40 PM

Scary... those two have been competitors forever. I thought that Square and EA had merged a few years ago. Is that wrong? ^^

Recca-kun

11-26-2002, 01:41 PM

I just hope Square doesn't mess up Enix's stuff.

Good possibility: More collaborative works between teams like Chrono Trigger.

Bad possibility: Enix follows Square's trend and starts making only Dragon Quest games and spinoffs.

And yes, Square merged with EA back in 1998 I believe...

psythe

11-26-2002, 01:42 PM

Was talking about this thismorning. Final Fantasy + Dragon Quest. Could you have any greater hold on the rpg market. Although it does worry me what direction they will go in.

psythe

11-26-2002, 01:43 PM

Originally posted by Celine
Scary... those two have been competitors forever. I thought that Square and EA had merged a few years ago. Is that wrong? ^^

No, you are right, Square and EA merged in the US market to form Square / Electronic Arts.

Studmaster

11-26-2002, 01:43 PM

Square and EA didn't exactely merge. They have had a joint partnership/ventureship that was to be used to help distribution in both markets for each country. (Two of the strongest brandnames in their home turfs) The joint venture was called Square EA.

However, this will end in 3/2003, and with this bomshell, it may not be renewed.

Edit: I thought you meant Square and Enix

Rey-Rey

11-26-2002, 01:44 PM

Why is it a blow? Don't you want Tifa and Kitty-N to battle it out in Bust-A-Move? ^__^ v

Ranma Saotome

11-26-2002, 02:07 PM

Originally posted by Rey-Rey
Why is it a blow? Don't you want Tifa and Kitty-N to battle it out in Bust-A-Move? ^__^ v

He makes a very good point. ^^

Ranma Saotome

11-26-2002, 02:11 PM

This is good news... The underdog buys out thier #1 contender. :D To me, the company should be called Enix Square. And now they're mergin with Namco? Whoa....

LOL. Mishima Zaibatsu is the evil corporation in the next Final Fantasy. But yeah, Namco wasn't part of the merger directly.

MugenH

11-26-2002, 02:42 PM

Am I the only one who's nervous about this? It seems that post FF:SW, Square has been cutting corners to pull more profit (Read: FFX-2), and perhaps now they'll have a much larger operating budget, so they can take more risks again.

But -- there's also the possiblity that Enix will now be putting their 2 cents into ever Square game made ... and the overall quality of both franchises will diminish, only to have Square-Enix bought out by Sony, and forced into slave labor for one system.

Nervous,
MugenH.

Studmaster

11-26-2002, 02:47 PM

Mugen H: Nope you're not alone in your nervouness in this one. Personally, there is a LOT of bad that can come from this one, and a lot of good too. However, mergers of this size are not really beneficial for the consumer.

Rey-Rey

11-26-2002, 02:50 PM

Then please explain why it's a BLOW. You make it seem like this merger will end video games as we know it. -_- Things happen and there's really no one dominant force when it comes to video games. However, there are great game companies in this business and Square is one of them.

If anything, it shall be interesting on what happens after this merger happens. Maybe Dragon Warrior and Final Fantasy will have a crossover. Plus, how DO you know if the quality diminishes just because a merger happens.

Time will tell on what will happen. Just wait and see is all I'm saying.

Studmaster

11-26-2002, 03:00 PM

Yes, that is true, however lets not confuse ourselves and think Enix sold it's company. Square stock become 81% of Enix stock (i.e. if you have 100 shares of Square, you will get 81 shares of Enix, because one Share in Square will be .81 Share in Enix in this deal) meaning that Square's Stock is gone, so it's the one who technically will be losing their brand name in terms of the stock market. They had to lose something for control

Rey-Rey: Well, Rey-Rey, If you think I'm saying that I'm not. However, I think you're underplaying this a little bit. Square and Enix hold a lot of pull in the Japanese VG industry (which is still a major force overall), so much so that they did this.

When the PS and Saturn came out in 94, Sony was the one who was getting it's ass kicked while the Saturn was outselling it. It wasn' t until Square announced FF7 for the PS, that Sony started to look like a favorite to win, and began to outsell the Saturn. However, the battle wouldn't be totally decided until 97 when Enix annouced DQ VII for the PS. By having those two titles, they single handily made Sony the winner of the last generation.

And I never said the quality will outright diminsh, but this could be a possiblity, and you would be shortsighted to ignore it. As I said in my last post there can be lots of good from this as well.

(As for the reason why I haven't posted why I think this could be a blow...I'm still writing it. It's a really long post, almost editorial like in scope)

Rey-Rey

11-26-2002, 03:06 PM

No, I don't think it's a blow at all. Anything can happen in the game industry and everybody stabs each other in the back just like that. Where was Square before Sony? Where's Rare after Nintendo? Sure, they shift the momentum of the Japanese video game industry but that doesn't mean it will outright kill the whole video game industry itself. Who knows that in two years that Nintendo may have enough power to buy Rare AND Enix/Square?

I think this merger will be interesting. That's just my two dollars on the matter. ^__^ v

KaineMaxwell

11-26-2002, 07:44 PM

Well Square and Enix have both utilized the talents of the great Akira Toriyama (Dragon Quest series and Chrono Trigger)...

And I've also been discussing this on a video gaming board:
http://www.digitpress.com/forum/viewtopic.php?t=4338

Rinkun

11-26-2002, 10:01 PM

o_o; wow, it got you guys that fast? i saw that last night and i was like...wtf?

JoeBoeing

11-27-2002, 12:40 AM

*imagines DQ/DW remakes FFX style and shudders*

I wouldn't mind seeing an action/adventure starring Loto/Erdrick though. Loto is the coolest character in my opinion.

If this merger means that DQ/DW will change to a new battle system I'm 100% against it. DQ7/DW7 was 32-bit gaming perfection.

It could be very good for the industry but it could also be the worst move in gaming since Aruze bought SNK (Thank you God for having SNK leave Aruze's grasp).

FRom,
Joe

Alaria

11-27-2002, 12:50 AM

if Enix can keep Square from doing sequels, then I'm all for it...we'll see what happens...

Garou

11-27-2002, 01:37 AM

If this is True I hope we Get ALL THE dragon warrior games made into one or 2 dvd's for PS2!
even the ones that were Japan only......

:bouncer:

katrinastrife

11-27-2002, 05:12 AM

Hmm... I dunno. I'm not a serious enough gamer to REALLY have a strong opinion on this. I agree that since the FF:SW movie, Squaresoft's been looking for a quick dollar. What I've played of FFX was great, FF9 was good (except for the ending... and maybe the 3rd disk), FF8 SUCKED ASS (except for the ending cinema), and FF7 was my favorite (*swoons at the bishieness of Cloud and Seph*)

Kingdom Hearts reeks of "sellout!" almost as bad as the Gackt breath mint and camera commercials, but from what I hear, it's actually a decent game. And I have no gripes, because they brought Cloud AND Seph back! As long as I don't see any Yaoi Doujinshi with Sora and Donald Duck, I'm not complaining...

But, FFX-2's sole purpose seems to fit into two words not unheard of in the entertainment industry-- "Fan Service"

I honestly haven't played enough Enix games to comment. I played Star Ocean, and Tales of Destiny (at least I think that's Enix). But, I DO know a lot of Enix's new Anime -- Tokyo Underground and Spiral. I think that if they can spin good stories, that's exactly what Squaresoft needs... Unless they're both remaining independent and sharing money? I dunno ^^*

Anyway... There's my 500 yen.

Michi

11-27-2002, 06:43 AM

Oo. I just posted in the other Square Enix thread and didn't know this one was a larger discussion about it. ^_^;

I'd like to see Enix save Square from doing dumb money-starved ideas like FFX-2 and FF7-2 and the movie and blaaah.
I'd love to see a new Dragon Quest/Warrior game with the same amazing gameplay (I've lost 108 hours of my life to Dragon Quest VII and I'm still not on disc 2 yet, I keep taking breaks.. replaying FF9 now, for example) and story and etc as they always have with graphics the calibur of FF9. (I don't want FFX styled Dragon Quest, thanks.) It'd be amazing. x_x; I'd die and have a new favorite game. Not that graphics are all I care about... or else SNES-on-steroids-style Dragon Warrior VII wouldn't have that many hours of my life sucked into it.. but.. just wow. The thought of it.

Not that it's like those're Square and Enix's only games... I'd love to see the first RPG they can crank out together. Oh the possibilities. *_*

Rey-Rey

11-27-2002, 05:22 PM

You know why Square keeps making sequels? Because THEY KNOW it SELLS. And it's not as if each of the last FFs have been terrible; in fact, all of 'em have been GREAT in their own RIGHT. So if you want to blame somebody on why Square makes an FF every year, well, blame the people. If Final Fantasy X was as terrible as say, Quest 64, then you have a right to gripe about it.

Ranma Saotome

11-27-2002, 11:28 PM

Originally posted by Rey-Rey
If Final Fantasy X was as terrible as say, Quest 64, then you have a right to gripe about it.

Shut up! >.< I dropped 60 bucks on that game!

KaineMaxwell

11-28-2002, 10:21 AM

I had Quest 64...funnist part of playing it was beating people with the stick.

Pool Cue Ronin

11-28-2002, 07:57 PM

I could care less for this merger. Why? Both stick to what sells; it could be quite possible that we see NOTHING new come from it. There are some possibilities, but they're slim.
Just my general impression so far. I'll type more later.

Ranma Saotome

11-28-2002, 09:26 PM

You say that because you are a fighting game fanboy. But there are more RPG fanboys than there are fighting game fanboys. That an Namco is working with them. You could see Sepiroth in SC3.

Pool Cue Ronin

11-29-2002, 08:51 AM

No, I like games that don't suck.

Ranma Saotome

11-29-2002, 09:45 AM

To us some of us, fighting games suck. I know I'm not too fond of them, except for 2- Rival Schools and Project Justice. But a lot of here love RPGs.

Rey-Rey

11-29-2002, 11:32 PM

Normally, the best sellers in America are...

#1: SPORTS
#2: RPGs
#3: FIGHTING/ACTION/ADVENTURE

And with FPS getting more popular, expect that to crack the Top Three in the future.

Ranma Saotome

11-30-2002, 12:01 AM

Originally posted by Rey-Rey
Normally, the best sellers in America are...

#1: SPORTS
#2: RPGs
#3: FIGHTING/ACTION/ADVENTURE

And with FPS getting more popular, expect that to crack the Top Three in the future.

I wouldn't be suprised if it didn't already.

Studmaster

11-30-2002, 10:20 AM

I think it already does for the PC, but that's not important to this thread right now.

However, I do have to chime in with Pool Cue Ronin a bit. I'm personally disgusted with Square now and days. Not to say that there games weren't good this Generation, but they've lost there charm that made FFIV one of the best games of all time, and it still is a charm to play through in 2002. Enix however, I have different feelings about them. They may stick to what sells, but at least they try to add a little something to their sequeals, and new RPG's. Valkrie Profile was so awesome, and so was Star Ocean 2.

If the best of each house is seen, then the merger would be a success IMO. For now, I take a wait and see attitude.